Environmental, Social & Governance Reporting in. Travel & Tourism: Trends, Outlook and Guidance

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1 Environmental, Social & Governance Reporting in Travel & Tourism: Trends, Outlook and Guidance

2 Foreword FOREWORD Travel & Tourism companies, like any other businesses, are increasingly affected by environmental and social issues that can influence global demand and industry-wide profitability. Moreover, their customers and the communities in which they operate increasingly evaluate the responsibility of organisations and, through the internet and social media, they have numerous tools with which to inform and shape opinions on the sector as a whole. In a Harvard Business Review article entitled Leadership in the Age of Transparency, the authors declared that [it is] no longer possible to ignore externalities and that the true measure of corporate responsibility and the key to a business s playing its proper role in society is the willing, constant internalisation of externalities. Publicly reporting on issues relating to sustainability, corporate responsibility, or environmental, social and governance (ESG), is a method by which companies demonstrate a commitment to transparency and, through the reporting processes, articulate and advance management approaches to proactively addressing externalities. ESG reporting has developed over the course of three decades as relationships between business and society have evolved. Recent trends show that ESG reporting is becoming a mainstream platform for organisations through which to communicate with and engage stakeholders. ESG reporting is now the norm among the largest companies in most countries and is becoming more prevalent across all sectors. Whether through customer or investor demand, or increased initiatives from governments and/or market regulators, one can expect the majority of WTTC members to address ESG reporting in some form over the foreseeable future. Nevertheless, if this forecast is to be realised, it will require a big leap forward given the number of companies currently reporting. This research report, prepared by Greenview, and initiated by the WTTC Tourism for Tomorrow Working Group of representatives from over 25 Member companies, is intended to provide WTTC Members with a thorough understanding of ESG reporting including the background to its development, the concepts, terminology, key entities and available external resources, as well as its status across all sectors and, specifically, within Travel & Tourism. The research is divided into three sections. The first provides a broad background overview of ESG reporting s current status in business, together with trends that are expected to influence and shape ESG reporting through the rest of this decade. These include some of the current challenges, gaps and opportunities for Travel & Tourism to address ESG reporting collectively as a sector. The second section examines the state of ESG reporting within the Travel & Tourism sector, identifying fundamental concepts and providing detailed benchmarking. The third section offers more tailored guidance for Travel & Tourism companies to help them set up or improve existing ESG reporting platforms. A series of briefs are provided for a better understanding of the concepts relating to some of the issues most commonly reported. While the research is presented as one report, its three separate and independent sections will facilitate updating and expansion to ensure that WTTC members continue to benefit from the latest ESG reporting trends. David Scowsill President & CEO World Travel & Tourism Council 3

3 Contents CONTENTS Foreword Section 1: Overview of ESG Reporting Trends 1. Concepts 2. The Market Makers 3. The Audiences 4. Other Uses of ESG Reporting 5. Reporting Trends 6. Industry Outlook, Implications and Opportunities Section 2: ESG Reporting in Travel & Tourism 1. Prevalence of Reporting 2. Related Sector Initiatives 3. Report Content and Components 4. Key Issues Section 3: 1. Primary Steps to ESG Reporting 2. Issue Briefs Energy Water Climate Change Waste Workforce Supply Chain Community Governance, Risk and Compliance Appendix I: About WTTC s ESG Research Appendix II: List of Acronyms

4 Section 1: Environmental, Social and Governance Reporting for the Travel & Tourism Sector OVERVIEW OF ESG REPORTING TRENDS 1.2 The Market Makers Overview of ESG reporting trends Who are the market makers driving the practice of ESG reporting? ESG reporting involves a myriad of players playing different roles, some of them wearing multiple hats within the marketplace. For a better understanding of the landscape, ESG reporting can be viewed as a series of market makers who influence what is reported and elevate its importance: 1.1 Concepts Varied approaches, but based on the same fundamental concepts Transparent public reporting on material environmental, social and governance (ESG) risks, opportunities and performance is now both a common practice within, and even an expectation of, companies across all sectors, including those in Travel & Tourism. ESG reporting is a global trend with reporting rates for companies in the Americas, Europe and Asia Pacific currently standing at 76%, 73% and 71% respectively. Of the 250 largest global companies, 93% reported on ESG performance in In growing markets, the number of companies reporting has increased significantly, with China up 16% and India up 53% from 2011 to Companies report in different ways through stand-alone ESG reports, integrated annual financial reports, and/or dedicated corporate websites. The advantage of having a dedicated website is that it can include additional information such as ESG statements of purpose, policies, progress against targets and interactive context designed to engage stakeholders around key issues and align to the company s brand What does ESG really mean? Why is the term used? Market Makers ESG commitment formers (creating demand) Overview ESG reporting is driven in large part by entities that set forth a series of commitments to which organisations become members and signatories. Within these commitments, selfreporting on ESG and requesting ESG reporting from entities within one s value chain are often included. A leading set of commitments among investors is the UN Principles for Responsible Investment (PRI) with over 1,300 global signatories representing US$45 trillion in assets in management 2. PRI signatories include some of the largest pension funds in the USA, Europe, South America and Australasia. Two of the six principles are to seek appropriate disclosure on ESG issues by the entities in which they invest, and to report on [responsible investment] activities and progress toward implementing the Principles 3. The term ESG, used widely within the investment community, reflects the view that managing environmental and social topics is a governance issue for organisations, a proxy for the quality of their management teams, and a process through which to assess whether they are positioned for long-term success. Combining the three words environmental, social and governance also provides a more tangible and easily understood set of concepts that does not carry any other connotations that are usually associated with sustainability or corporate responsibility. The term ESG reporting within this report is used to encompass public disclosures that may use other terms such as a sustainability report, corporate responsibility report, corporate social responsibility report, corporate citizenship report, responsible business report, creating shared value report, or environmental report. But it also encompasses responses to ESG related surveys and questionnaires, as well as information used in ESG ratings, rankings and indexes Every organisation has an ESG strategy, whether or not they realise it Regardless of revenue, employee count, or geographic reach, every organisation has an ESG strategy whether they realise it or not. Parts of the ESG strategy include actions already undertaken to meet compliance requirements, such as those related to employment practices. Other parts are common sense, good business practices already in place, such as engaging with guests, suppliers and communities, and identifying process efficiency measures that have corollary environmental benefits. The pre-existing ESG strategy is frequently also an outgrowth of the company s culture and the beliefs of its founders. For lenders, financial institutions commit to the Equator Principles (EPs) to manage environmental and social risks in project financing. As of 2014, approximately 80 financial institutions, including Bank of America, Citigroup, HSBC and JP Morgan 4, had officially adopted the EPs, estimated to cover more than 70% of international project finance debt in emerging markets 5. Other ESG commitments formed by the financial sector and banking industry include the Carbon Principles 6 and Climate Group 7. In addition, the Ceres Coalition comprises more than 130 investors, advocacy groups and other public interest organisations working to mobilise investor and business leadership to reduce environmental and social risks carbonprinciples.org 7 8 https://www.ceres.org/about-us/coalition 6 7

5 Overview of ESG reporting trends For companies, a leading a set of ESG commitment is the UN Global Compact (UNGC) through which companies commit to align their operations and strategies with ten principles in the areas of human rights, labour, environment and anti-corruption. To maintain active participation, companies must communicate on progress towards implementing the ten principles annually, and often do so by publishing an annual ESG report. In 2014, more than 8,000 businesses in 145 countries participated in the UN Global Compact 9. Participants include global leaders across sectors, such as Coca-Cola, Pepsi, Microsoft, Intel, Ford and Johnson & Johnson 10. UNGC participants commit to enact within sphere of their influence each of ten principles. As a result, UNGC participants often set forth supplier standards and request data from suppliers, including corporate travel providers, on ESG topics and performance. The financial power behind these commitment-forming global investors, lenders and corporations has created demand for ESG reporting among the thousands of companies in their value chain, and creates a mechanism for which the practice of ESG reporting is becoming institutionalised. In addition, the International Integrated Reporting Committee (IIRC) is an entity consisting of international regulators, investors, companies, standards providers, accountants and non-governmental organisations, whose mission is to enable integrated ESG reporting to become a mainstream practice in both the public and private sectors 17. In 2014, more than 35 investor organisations and 100 companies, including Unilever, Clorox, Marks and Spencer, Microsoft and Tata, participated in the IIRC Pilot Programme 18. Sector-specific framework providers are also gaining market influence. As an example, the Global Real Estate Sustainability Benchmark (GRESB) distributes a survey on behalf of 46 investors representing US$5.5 trillion in capital 19. In 2014, 637 real estate companies, including those owning Travel & Tourism assets, responded. The GRESB survey covers both environmental and social topics with questions about supply chain standards and monitoring. GRESB was recently absorbed into the Green Building Certification Institute, the partner organisation of the US Green Building Council that focuses on technical advancement of certification across various components of buildings and real estate. Commitment formers may also provide their own ESG frameworks, as in the case of the UN Global Compact, which has guidelines for its signatories to issue a Communication of Progress (COP) on its progress towards applying the ten principles. ESG reporting framework providers (creating structure) While commitment formers assist in creating demand for ESG reporting, a group of non-profit organisations create the structure, frameworks, guidelines and standards for reporting on ESG. The Global Reporting Initiative (GRI), established in 1997, is often referred to as the de facto guideline for ESG reporting in the absence of mandated reporting. In 2013, 78% of ESG reporters referenced the GRI guidelines in their disclosures 11. At least partial reporting in alignment with the GRI G4 guidelines, or an explanation for non-reporting, is embedded with the Investor Listing Standards Proposal issued by the Investor Initiative for Sustainable Exchanges. The CDP, formerly known as the Carbon Disclosure Project and established in 2000, is an independent body that develops and distributes annual information requests on behalf of 822 investors representing US$95 trillion in capital and approximately 66 purchasing organisations, including Wal-Mart 12. Initially distributing a single questionnaire on climate change, the CDP now also offers Water, Forest and Supply Chain disclosure programmes. And the CDP engages with cities, governments and policy-makers. As the practice of ESG reporting matures and the perception increases that ESG-related externalities are material to the financial success of companies, standards are now also under development for ESG reporting within investor filings and annual investor reports. Globally, the Climate Disclosure Standards Board (CDSB) a consortium including the Carbon Disclosure Project (CDP), Ceres, the Climate Group, the World Council for Business and Sustainable Development (WCBSD), the World Economic Forum (WEF) and the World Resources Institute 13 has developed a draft framework for disclosures in mainstream financial reports. The CDSB framework has expanded beyond climate change to include natural capital information, namely water and forest commodities 14. In the USA, the Sustainability Accounting Standards Board (SASB) is currently developing standards for material sustainability issues designed for disclosure in mandatory filings to the Securities and Exchange Commission (SEC), such as Form 10-K and 20-F 15. As part of its partnership with the CDP, SASB receives technical assistance in referencing CDSB protocols for disclosure of carbon emissions 16. ESG rankings, ratings and indexes (comparing & benchmarking) ESG research providers With the proliferation of public ESG data and increased interest in using ESG data to inform decision-making, many organisations rate and rank companies based on their ESG information. These include broad-based, holistic ESG rankings, such as the Dow Jones Sustainability Indices (DJSI), FTSE4Good Indexes and the Global 100 Most Sustainable Companies. In addition, there are targeted environmental rankings, including the Newsweek Green Rankings and the CDP Leadership Index, as well as social responsibility rankings, like Ethisphere s World s Most Ethical Companies. Regional, local and industry rankings, such as Brazil s Most Sustainable Companies ranking, also exist. Goldman Sachs GS SUSTAIN platform recently expanded its analysis to nearly 1,400 midto large-sized companies globally, following the collection and analysis of nearly 100,000 ESG data points from publicly available sources 20. A multitude of ratings and rankings have sprung up in recent years as the ability to use publicly available data for comparative analysis has a relatively low barrier to entry. Rate the Raters research has been published by SustainAbility on evaluating the various ratings and organisations to help understand the strengths and weaknesses of each 21. To assist organisations in navigating the numerous publicly available ESG rankings, ratings and indexes, the Global Initiative for Sustainability Ratings (GISR) has been established and has developed 12 principles from which the quality of ratings can be assessed. These principles include transparency, impartiality, continuous improvement and assurability 22. In the background, behind many leading ESG rankings, ratings and indices, a set of specialised ESG research providers also develop and apply the methodologies to provide support and research products to investors and stakeholders. Leading ESG research providers include SAM (supporting the Dow Jones Sustainability Index), EIRIS (supporting the FTSE4Good Indexes), Trucost (supporting the Newsweek Green Rankings), IW Financial (supporting Corporate Responsibility Magazine s annual 100 Best Corporate Citizens list), and CRD Analytics (supporting the NASDAQ Global Sustainability Indexes). Some firms perform their own research in house to produce their own ratings, as is the case of oekom research (developing proprietary country, sector, and corporate ratings in addition to publishing annual corporate responsibility review reports) ned_ before=&keyword=&listing_status_id=3&organisation_type_id=&page=1&per_page=250&sector_id=all&utf8= 11 survey-2013-exec-summary.pdf 12 https://www.cdp.net/en-us/pages/about-us.aspx GRESB Survey Report ratesustainability.org/standards/principles/

6 Overview of ESG reporting trends ESG aggregators and disseminators Consultants, auditors, and data management providers Report Audiences Another by-product of ESG reporting is the aggregation and dissemination of information across platforms. Examples include CSRHub, which houses data from more than 300 data sources and nearly 9,000 companies 24, and the Corporate Register, which is an online registry of ESG reports. In addition, ESG frameworks, including the GRI, CDP, UNPRI, and UNGC, provide a repository to access ESG reports. Other third-party disseminators of information include Google, where companies CDP Climate Change scores are posted as a key statistics on public companies Google Finance pages. Bloomberg s ESG products provide data on more than 120 indicators for approximately 5,000 publicly listed companies 25 globally, based primarily on public disclosures, and are increasing coverage every day. Bloomberg s products include scoring based on quantity of disclosure (not the quality of disclosure or the organisation s ESG performance), robust, customised screening and other portfolio optimisation tools. Consultants, auditors and data management providers also play an important role in shaping markets. Consulting firms, including McKinsey, Bain and SustainAbility, regularly publish research that emphasises the strategic importance of ESG issues, and conduct studies to elucidate the business case and potential financial implications. Large accounting firms, including PwC, Deloitte, KPMG and Ernst & Young, actively engage with standard providers to promote and emphasise the emerging practice of having ESG data assured. Data management providers, including SAP, credit360, CSRWare and OneReport, also work to streamline and promote the practice of ESG reporting. 1.3 The Audiences Within the Travel & Tourism sector, the primary audiences for ESG information are often corporate customers, investors and employees. Additional audiences include customers, communities, advocacy groups and media, regulators and government agencies, suppliers and business partners, and ESG raters and analysts. When preparing ESG disclosures, it is important to understand the market dynamics among ESG report audiences: Market Dynamics Investors Employees ESG raters and analysts Within the investment community there has been a shift from negative to positive screening on ESG performance. Originally, this community would seek to divest from companies or investments based on negative market perceptions. Currently, certain investors specifically seek companies with a positive ESG reputation, with some portfolios and indexes focused on positive screening. ESG is perceived as a framework for managing risks and achieving above average returns. Among investors, institutional investors and pension funds are an important audience, as many have committed to incorporate ESG into investment decisions. Additional investor audiences include ESGfocused investment firms, such as Calvert and Generation Investment Management, for which ESG is central to fund selection. Investors are particularly interested in governance practices, value creation opportunities, and quality of management approaches. Some investors will seek specific ESG-related criteria as part of their investment evaluations. The degree to which investors use and value the information will vary as well. Some investors have signed the UN PRI and request information as a best practice while others have more rigorous screening processes and evaluation criteria. In addition to the commitment formers, investor groups have themselves formed associations around the concepts of screening and evaluation, including the US Forum for Sustainable and Responsible Investment (US SIF), and the Global Sustainable Investment Alliance (GSIA), which is a consortium of national-level investment forums. Sustainability is also now a leading topic of interest among the newest generation of employees entering the workforce, with research indicating that 96% of Generation Y look for an employer who is environmentally aware 26, and employees who are proud of their organisation s socially responsible activities are more engaged, confident and likely to stay with the company 27. ESG reports are used as an engagement and recruiting tool. In addition to environmental programmes, reporting on workforce and community engagement is of particular importance to employee audiences (both current and prospective). Given the role that ESG raters and analysts play in ranking, aggregating and disseminating information in a company s ESG report to inform public perception, they are also an important audience. ESG raters and analysts typically seek to find easily accessible information on policies, programmes and performance metrics to support integration within their methodologies for developing rankings, ratings, indices, and other products. Corporate customers Large corporate purchasers across nearly every sector now ask their suppliers to provide information on ESG policies, performance and commitments. Notable examples include Wal-Mart, which is expanding its sustainability questionnaires for suppliers from 15 to 100 questions, and Microsoft, which is specifically requesting that its Tier 1 suppliers produce GRI reports. Other large corporate purchasers that issue sustainability surveys to suppliers include IBM, Airbus, Siemens, Marathon Oil, British Telecom, Boeing, Volvo, BMW, and Johnson Controls. Guests Guests are also a potential audience for ESG reporting, and are typically most interested in topics that are most material to them, such as the environmental attributes of product and services, safety and sustainability of food, and measures to protect customer data privacy. For guests, companies also host ESG reports on their own branded corporate responsibility websites. Examples include Hyatt Thrive and United Airlines Eco-Skies. As with investors, corporate purchasers are also using specialised research providers like EcoVadis, which conducts a survey and grades suppliers on sustainability to inform decision-making and manage their value chain risks. Of particular interest to corporate customers are the environmental attributes of products and services, and mechanisms to ensure responsible labour and human rights practices within the supply chain. Communities Communities in which an organisation has a significant presence represent another potential audience for ESG reporting. Community audiences are generally interested in knowing an organisation is responsible and striving to make a positive impact in communities while also mitigating any potentially negative impacts to communities. Information found in ESG reporting can help form the basis of discussion for a company s social licence to operate Johnson Controls Global Workplace Innovation. (2010). Generation Y and the Workplace. Retrieved from 27 Ketvirtis, S. (June 2012). How Corporate Citizenship Impacts Employee Engagement. Northwestern School of Education and Social Policy. Retrieved from northwestern.edu/msloc/knowledge-lens/stories/2012/how-corporate-citizenship-impacts-employeeengagement.html#sthash.uwtxkmmm.dpuf 10 11

7 Advocacy groups and media Regulators and government agencies Suppliers and business partners Industry peers and influencers Environmental, Social and Governance Reporting for the Travel & Tourism Sector Advocacy groups and media are also important audiences because their assessments of an organisation can create a multiplier effect that influences guest and other stakeholder perceptions and overall reputation. These audiences generally seek to find easily accessible information on the management approach to the economic, environmental and social topics about which they care the most. Since reporting is prevalent across sectors, campaign-focused advocacy groups are often able to engage in sector-wide comparisons regarding key issues, using ESG reports as a resource. Examples include Friends of the Earth and Greenpeace which publish regular advocacy reports, such as How Dirty is Your Data? 28 Companies in Travel & Tourism, particularly cruise lines, airlines and airports, often identify regulators and government agencies at the local and national levels as a priority audience for their ESG report. A company s ESG report provides the opportunity to demonstrate their commitment to compliance with laws and responsible business practices, as well as describing their management approach in addition to key actions and/or investments to comply with laws and regulations. It also provides the opportunity to explain any challenges that the organisation may have experienced with regard to compliance. In addition, when entering new geographic markets, an ESG report can be shared with local and national regulators to demonstrate their licence to operate. Furthermore, the ESG report can explain the organisation s economic, social and environmental practices to assist in addressing any potential concerns and/or to differentiate an organisation from other potential entrants in the market. It is also worth noting that regulators and government agencies are also purchasers of travel services. As with corporate customers, they consider ESG practices in purchasing decision-making. As an example, the US General Services Administration encourages potential vendors to disclose their environmental performance through ESG reports or other mechanisms 29. Through ESG reporting, organisations can communicate their expectations of suppliers and business partners and, in numerous instances, areas where shared values and focus areas exist. When reporting on ESG, organisations should be aware that it is very likely that industry peers and influencers will view the information for competitive benchmarking purposes. Through ESG reporting, organisations have the opportunity to highlight leading-edge practices and innovative approaches to industry challenges. Overview of ESG reporting trends 1.4 Other Uses of ESG Reporting More in-depth research As more organisations begin reporting routinely, the amount of ESG-related content allows for deeper analysis and comparison across sectors and within sectors. Researchers can examine quantitative and qualitative disclosure across many issues to produce findings for purposes other than rating or ranking companies. In addition to analysing the content for ESG ratings, rankings, and indices, a current trend is to assess the quality and quantity of information reported. The biennial KPMG Survey of Corporate Responsibility Reporting produces results on the frequency of reporting among large companies, major sector and countries 30. The report dissects trends on what type of information is being reported, use of third-party assurance, reporting content and processes, and the quality of reporting. The study does not highlight Travel & Tourism specifically, although related macro-sectors such as transport, trade and retail, and food and beverage, are evaluated. Another annual exercise which tracks the pulse of reporting is the Green Business Report, in a general comparison of reporting trends in the USA and globally. In its 2014 report, the State of Green Business, it also began to examine sectors. Travel and leisure, identified as a broad sector, was listed as the second worst performing sector in terms of GHG emission levels (calculated as contribution to GDP per contribution to GHG emissions), and relatively fewer of its impacts were said to be found in the sector s supply chain than in other service or consumer discretionary sectors 31. Moreover, an increasing number of studies are being published which compare groupings of companies that strategically address ESG (where the information is obtained through reports) and demonstrate that they are out-performing those that do not 32. An abundance of corporate reports also collectively enable specific topics that are commonly reported among companies to be researched 33, or for reporting trends within specific countries to be analysed 34. Within Travel & Tourism, content analysis research has been published in peer-reviewed journals where researchers leverage ESG reports as source documents to compare companies and arrive at generalised conclusions about their respective industries. Such research has been published for cruise lines 35, hotels 36 and theme parks Benefits of reporting strategically and consequences of inaction There are numerous benefits to viewing ESG reporting as a strategic initiative. First, they are a good way of promoting a company s ESG performance and governance through the more than 100 corporate ESG rankings and other public repositories of data. The readers of these accounts comprise investors (some of whom are activists), lenders, corporate customers, employees, consumers, regulators, the media and other influential stakeholders. Through self-reporting, companies have the opportunity to manage the story that will be told. If a company does not report on ESG performance, it may create the perception that: The company is not organised to proactively address these issues The company does not care that these issues are important to its major customers and financiers, and/or The company does not have strong management and governance systems in place. Moreover, if a company reports on ESG but fails to acknowledge and describe its management approach to material ESG issues, a perception may be created that the company is greenwashing and/or is disingenuous in its stated commitments and values. 28 Cook, Gary, and Van Horn, Jodie. How Dirty Is Your Data? Greenpeace International, n.d. Web. climate/2011/cool%20it/dirty-data-report-greenpeace.pd. 29 GSA Blog: GSA Uses Government Buying Power to Cut Carbon Pollution. May The KPMG Survey of Corporate Responsibility Reporting Rep. KPMG, n.d. Web. 1 Apr <www.kpmg.com/global/en/issuesandinsights/articlespublications/corporate-responsibility/documents/corporate-responsibility-reporting-survey-2013.pdf> 31 GreenBiz Group Inc. State of Green Business 2014 pp. 36, For examples, see Robert G. Eccles, Ioannis Ioannou, and George Sarafeim. The Impact of Corporate Sustainability on Organisational Processes and Performance. Harvard Business Review Working Paper July 29, 2013; and Sam Research Alpha from Sustainability, For example, see Umias, Elizabeth Corporate Human Rights Reporting: An Analysis of Current Trends. November China country analysis, see Gao, Yongqiang. CSR in an Emerging Country: a Content Analysis of CSR Reports of Listed Companies. Baltic Journal of Management 6.2 (2011) Bonilla-Priego, Maria Jesús, Xavier Font, and Maria del Rosario Pacheco-Olivares. Corporate sustainability reporting index and baseline data for the cruise industry. Tourism Management 44 (2014) Judy L. Holcomb, Randall S. Upchurch, Fevzi Okumus. Corporate social responsibility: what are top hotel companies reporting?. International Journal of Contemporary Hospitality Management, Vol (2007) Judy Holcomb, Fevzi Okumus, Anil Bilgihan, (2010) Corporate social responsibility: what are the top three Orlando theme parks reporting?. Worldwide Hospitality and Tourism Themes, Vol. 2 Iss: 3, pp

8 1.5 Reporting Trends Current outlook ESG reporting is constantly evolving and shifting, and at a furious pace, with new trends and market makers developing all the time. Nevertheless, for companies planning on adopting ESG reporting, or seeking to keep abreast of trends, it is important to be fully aware of the five key current trends, which are detailed below. ESG reporting will become more regulated, and this will mean that the information disclosed will be increasingly subject to audits and verification, leading to the need for more sector-specific standards and granularity. A growing focus on a company s approach to ESG issues in its supply chain will further expand reporting concepts throughout businesses, whether large or small. And finally, the proliferation and eventual ubiquity of reporting will shift the focus away from the frameworks themselves back to the specific topics and indicators. As can be confirmed from the market makers identified above, sustainability reporting itself in the past decade has practically developed into its own small industry that has earned the attention of most large companies. The next decade will undoubtedly be marked by a vast expansion and evolution in ESG reporting Trend 1: Reporting initiatives are increasing at national and regional levels ESG reporting has historically been largely a voluntary exercise, driven by markets rather than regulation. We are seeing a gradual shift toward the reporting of ESG information being defined, requested and even mandated through governments and market regulators (stock exchanges). As of 2014, 19 members of the G20 had at least one regulation in place requiring that companies disclose a minimum of social and/ or environmental metrics. In addition, 12 of the 55 exchanges require aspects of environmental and social reporting for at least some of their listed companies, with 7 of those exchanges, including those in Brazil, Malaysia, South Africa and the UK, requiring such reporting for all listed companies 38. The emergence of ESG reporting guidelines through regulatory bodies has occurred in several instances over the past two decades, but is now gaining momentum, resulting in its own global initiatives. Some major concurrent initiatives include the Group of Friends (GoF) of Paragraph 47, the EU Non-Financial Reporting Directive, the Sustainable Stock Exchanges Initiative (SSE), and the World Federation of Exchanges Sustainability Committee. The GoF of Paragraph 47 is a loosely organised group of government regulators drawing its origins from the 47 th paragraph of the document The Future We Want, produced by the United Nations Conference on Sustainable Development (UNCSD) following the 2012 Rio +20 conference, which advocated for corporate sustainability reporting: Overview of ESG reporting trends GoF was formulated by four countries, and at the time of publication had grown to include nine countries (Brazil, Denmark, France, South Africa, Norway, Colombia, Austria, Switzerland, and Chile), which signed the Group s charter. The GoF also has been championed by the UN Environment Programme (UNEP) and the GRI. Plans are underway through this group to conduct stakeholder engagement, to foment and exchange best practices, and to compile a technical body of knowledge on sustainability reporting at a country level 40. Within the EU, in October 2014, the Council of the European Union adopted a directive for the disclosure of non-financial and diversity information for corporate transparency and accountability 41. The legislation will require companies with more than 500 employees to report annually on environmental, social and employee-related material topics, and to include disclosures regarding the companies policies, risks and performance for the reported topics. Companies that do not have policies in place would have to explain why they do not. This legislation is expected to affect 6,000 companies within the EU, and will vastly expand the prevalence of ESG reporting. Approximately 2,500 EU companies currently report on ESG performance on a regular basis 42. Companies subject to the legislation must begin reporting under the new directive at the start of their financial year , 44. In addition, in 2014, China s National Development and Reform Commission mandated greenhouse gas reporting for more than 20,000 companies and organisations 45. The mandate aligns with China s 2014 accord with the USA on climate change in which China has committed to limit carbon emissions to a [declared] peak and to generate 20% of total energy production from renewable energy sources by On the side of market regulators, the Sustainable Stock Exchanges (SSE) initiative has a slightly longer history. Created in 2009 by several entities under the United Nations as a voluntary commitment whereby, among other activities, stock exchanges endorse the following statement: We voluntarily commit, through dialogue with investors, companies and regulators, to promoting long-term sustainable investment and improved environmental, social and corporate governance disclosure and performance among companies listed on our exchange. 47 This group placed specific emphasis on ESG reporting through a presence at the Rio+20 conference and was influential in the inclusion of paragraph 47 itself. At the time of publication, 19 exchanges 48 had become partner exchanges on the SSE. And a feedback loop has begun to emerge, with some stock exchanges such as those in Johannesburg and São Paulo themselves becoming signatories of the UN PRI. In addition, the World Federation of Exchanges (WFE) in March 2014 announced the launch of a sustainability working group, comprising 11 global stock exchanges on its committee 49, to address ESG reporting within the investment and regulatory committee. Furthermore, research also indicates that the majority of the world s largest stock exchanges are either considering, or have developed, some form of ESG disclosure 50. Stock exchanges in Hong Kong and Singapore are examples of those that have developed guidelines on ESG reporting, although neither has officially joined the SSE, GoF or WFE sustainability working group. Moreover, several have either begun, or will begin, to offer sustainabilityrelated indices for investment, with the most prevalent example being the DJSI. Several studies have been conducted and made available as resources for understanding ESG reporting requirements by country 51. These are constantly changing as new initiatives are being proposed. We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments and relevant stakeholders with the support of the United Nations system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account experiences from already existing frameworks and paying particular attention to the needs of developing countries, including for capacity-building Sustainable Stock Exchanges Initiatives 2014 Report on Progress: 39 The Future We Want. Business and Industry: Sustainable Development Knowledge Platform. United Nations, n.d. Web. 01 Apr Group of Friends of Paragraph 47. Group of Friends of Paragraph 47. N.p., n.d. Web. 01 Apr <https://www.globalreporting.org/information/policy/gofpara47/pages/ default.aspx>. 41 Council of the European Union. Press release, Sept Large European Companies Now Required to Provide Mandatory Environmental, Social and Governance (ESG) Disclosure - corporategovernance/large-european-companies-now-required-provide-mandatory-environmental/ 43 Council of the European Union. New Transparency Rules on Social Responsibility for Big Companies. N.p., 26 Feb Web. <www.consilium.europa.eu/uedocs/cms_data/ docs/pressdata/en/intm/ pdf>. 44 Official Journal of the European Union. Directive 2013/34/EU of the European Parliament and of the Council. 26 June <http://ec.europa.eu/internal_market/accounting/ non-financial_reporting/index_en.htm> 45 China Moves Toward Mandatory Corporate Greenhouse Gas Reporting: 46 U.S. and China Reach Climate Accord After Months of Talks: 47 SSE Initiative. N.p., n.d. Web. 01 Apr <https://www.sseinitiative.org> BM&F Bovespa, Borsa Istanbul, Borsa Malaysia, Chicago Board Options Exchange, CME Group, Deutche Börse, InterContinental Exchange/NYSE, Johannesburg Stock Exchange, NASDAQ OMX, National Stock Exchange of India, Shenzhen Stock Exchange. 50 CK Capital. Trends in Sustainability Disclosure: Benchmarking the World s Stock Exchanges, October See Compilation of International and National Corporate Disclosure Initiatives. UNEP 06 December <www.unep.org/resourceefficiency/portals/24147/business- Ressource%20Efficency/Mapping%20exercise_SR%20Stakeholders%20and%20Initiatives.pdf.>; INCR Listing Standards Drafting Committee Consultation Paper: Proposed Sustainability Disclosure Listing Standard for Global Stock Exchanges, Appendix. CERES Investor Network on Climate Risk, April

9 Figure 1.1: Mapping of Leading Countries and Country Locations of Stock Exchanges involved in ESG Reporting Initiatives Overview of ESG reporting trends However, given that mandates for reporting will ultimately differ by country, the selection and level of alignment, integration, or application of current frameworks and guidelines within reporting mandates may take various forms depending on the individual country. Some initiatives develop their own guidelines which may directly reference GRI or similar, as is the case of the Hong Kong Exchange ESG reporting guidelines. They may also create their own, as is the case of France through the Grenelle Act or the Sustainability Accounting Standards Board in the USA, while others will simply adopt a pre-existing framework with minimal adjustment. The institutionalisation of reporting requirements on stock exchanges or in regulation itself is a complex exercise and will vary from country to country, yet the culmination of the above efforts will undoubtedly lead to an increase in ESG reporting in some form. 52 Switzerland Austria Key concepts include: Most, if not arguably all, stock exchange or government-led reporting initiatives are voluntary for companies. Even though it may be touted as a requirement in covering these initiatives, the common term used to describe these initiatives in disclosure is Report-or-Explain, Comply-or-Explain, or Apply-or- Explain, which creates a soft mandate for companies to either report, or explain why they do not report, without specific consequences for not reporting. Chile Jamaica Group of Friends Sustainable Stock Exchanges World Federation of Exchanges Working Group Country reporting initiatives are varied in scope, applicability and level of mandate, and also have differing levels of guidance available for reporters. At one end of the spectrum, countries have put forth prescriptive stipulations with comprehensive guidance documents. Canada issued a Starter s Guide to Sustainability Reporting 53 and the Government of India s 2011 National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business essentially contain a combination of the reporting framework with comprehensive guidelines and resources 54. At the other end, some initiatives may simply have encouraged reporting as a first step, followed by plans for developing any guidelines or reference documentation. A result of these trends are that the market is moving from voluntary reporting, which uses frameworks and guidelines from third-party organisations such as GRI and CDP, to reporting according to guidelines or standards directly issued by government authorities, policy-makers or market regulators. In the past year, a handful of frameworks and sets of guidelines have been proposed to influence reporting at a country level. After years of development, in December 2013, the IIRC released its International <IR> Framework with the purpose of establishing some guiding principles and content for the development of an integrated report 55. The Investor Initiative for Sustainable Exchanges, an initiative of the Investor Network on Climate Risk (INCR, also a project of Ceres), recently released a proposal with recommended stock exchange requirements for ESG reporting 56. Instead of proposing a framework, it suggests specific components that stock exchanges can adopt in their own guidelines. By way of example, it recommends that companies materiality assessments should be disclosed in annual financial filings, and that they should provide a hyperlink in their annual financial filings to an ESG Disclosure Index, as well as disclosing information on the ten specific ESG categories, using a comply or explain approach for each. Similarly, the UN Conference on Trade and Development also released best practice guidance for policy-makers and stock exchanges in In theory a company can simply explain why it is not reporting due to insufficient data, proprietary and confidential information, a lack of clear guidance on reporting parameters by the initiative s governing body, and so forth. Some of the most touted examples of stock exchange reporting, BM&F BOVESPA in Brazil and the Johannesburg Stock Exchange in South Africa, both follow the report-or-explain concept. However, it should be noted that the report-or-explain concept serves the dual purpose of initiating discussions toward mandated requirements, while giving companies the opportunity to prepare for forthcoming requirements. One notable example is India, where the Government of India s Ministry of Corporate Affairs put forth voluntary apply-or-explain guidelines on social, environmental and economic responsibilities of business, which contained a sustainability reporting component along with approaches to social responsibility. After years of discussion, in 2014, India expanded the apply-or-explain concept into a CSR reporting law, whereby companies with a certain income threshold will need to spend at least 2% of their average net profits on CSR initiatives or report a reason for not complying. The ruling officially passed in late February 2014 to take effect in April 2014, so the turnover for compliance was very quick. Indian companies that had not heeded the 2011 responsible business guidelines would have had to act quickly to set up their platforms 58. Regulated disclosure of individual topics is often included in listings of countries with ESG requirements, but is not really complete ESG reporting. The umbrella of topics covered under ESG is arguably vast enough to encompass any new disclosure requirement. Some countries have placed more stringent reporting requirements on a specific topic or topics. One example is the USA, where the Sarbanes-Oxley Act of 2002 constitutes a large portion of governance disclosure. More recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012 carries a provision on disclosure of sourcing of conflict minerals, particularly coltan, which is predominantly a key metal in the production for smartphones and has become a growing social concern. The majority of the world s coltan reserve can be found in the Democratic Republic of Congo and has since created tremendous political and civil unrest over the mining of this metal 59. As a result, and technically speaking, the USA now has mandatory reporting relating to ESG issues of supply chain, human rights and community impacts but it is limited to this specific topic. In the UK, carbon reduction and energy efficiency have been the ESG focus, first through the country s Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, which requires the participation of both the public and private sectors. The cap and trade system currently has over 2,100 participants 60. In 2013, the London Stock Exchange passed a mandate that all companies listed on the stock exchange must publish total GHG emissions 61. Furthermore, Article 8 of the EU Energy Efficiency Directive of November 2012, whereby energy audits are mandatory for large entities, goes into effect this year. In order to address this directive directly, the government has launched the Energy Savings Opportunity Scheme (ESOS), which requires all audits to take place by 5 December 2015, with follow-up audits every four years NASDAQ and NYSE Government of India Ministry of Corporate Affairs. National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business, International Integrated Reporting Council. The International <IR> Framework, December Ceres Investor Network on Climate Risk. Investor Listing Standards Proposal: Recommendations for Stock Exchange Requirements on Corporate Sustainability Reporting, March United Nations Conference on Trade and Development. Best practice guidance for policy-makers and stock exchanges on sustainability reporting initiatives, 28 August New Rules for Corporate Social Responsibility Announced. Nishith Desai Associates. Web. 12 Mar Ayres, C. J. (2012). The international trade in conflict minerals: Coltan. Critical Perspectives on International Business, 8(2), doi:dx.doi.org/ / CRC Energy Efficiency Scheme Annual Report Publication. Rep. Environment Agency, n.d. Web. 1 Apr <cdn.environment-agency.gov.uk/lit_8899_42af3a.pdf>. 61 Environmental Leader. Environmental Leader RSS. N.p., 20 June Web. 28 Mar <www.environmentalleader.com/2012/06/20/firms-on-london-stock-exchangewill-be-forced-to-report-co2-data/> 62 Energy Savings Opportunity Scheme. GOV.UK. Department of Energy and Climate Change, n.d. Web. 08 Apr <https://www.gov.uk/government/consultations/energysavings-opportunity-scheme> 16 17

10 Integrated reporting has emerged in various forms, though not necessarily using the <IR> framework. In its 2013 Corporate Responsibility Reporting Survey, KPMG cited general acceptance of integrated reporting as the next destination for corporate reporting. The survey found that 51% of reporting companies included ESG information in their annual financial reports. This represented an increase from 20% in 2011 and 9% in While more than half of all companies included ESG information in financial reports, only 10% of reporters published what they considered to be an integrated ESG and financial report 63. Integrated reporting can be considered short hand for the term integrated financial and non-financial reporting, whereby the comprehensive scope of ESG issues and reporting concepts are embedded in the same reports in which companies publish financial performance information. The term integrated reporting has been championed by the IIRC and its International <IR> Framework. This framework represents a forward-looking design to adopt integrated thinking as a way of breaking down internal silos and reducing duplication, and improves the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital. 64 The <IR> Framework centres on the concept on value creation in the context of capital flows among the following types of capital : financial, manufactured, intellectual, human, social and relationship and natural capital. It also seeks to streamline current financial reporting mechanisms and reduce their complexity. The framework was released in December 2013 and may see increased use and alignment. A difference, however, should be noted between the use of the term integrated reporting and the <IR> Framework, which can create confusion in the marketplace and requires clarification 65. While many large companies are participating in the <IR> Pilot Programme, the use of the <IR> Framework is not mandatory to produce an integrated report. The companies currently publishing integrated reports do not necessarily follow this framework, nor is it embedded into current country stock exchange requirements. France is an example of a country that has what can be considered integrated reporting for over a decade through its Grenelle Act for extra-financial reporting, requiring environmental and social performance to be included in annual reports. However, these requirements are not aligned with the <IR> Framework. Regulated disclosure may be set at certain thresholds of scale and may not affect most Travel & Tourism companies. This is most obvious when a country s requirement originates from the stock exchange, and therefore does not apply to those companies not publicly traded or seeking listing on an exchange. Other country reporting schemes may have more comprehensive coverage of ESG topics, but will set thresholds of income to determine which companies are required to report. Furthermore, some government-regulated disclosure may have certain thresholds for size or beneficial ownership, excluding small and medium enterprises (SMEs) or those without public (state) ownership. The proposed EU legislation is an example, with a threshold of 500 employees (the same threshold as for France s Grenelle Act). As the majority of tourism businesses are SMEs, they will not be subjected to the same stringency or breadth of disclosure, although the principles of reporting will still be valid and some initiatives will carry provisions and guidance for SMEs. Likewise, as many SMEs form part of the supply chain of larger tourism businesses, they will be engaged to address key topics when responding to supplier evaluation processes of larger companies. However, when examining these trends, Travel & Tourism companies should be cautious, as much of the bell-sounding itself is done by the ESG reporting community, which itself stands to benefit from the buzz. Overview of ESG reporting trends Trend 2: Emphasis on materiality leading to more specific reporting frameworks, guidelines and standards As the practice of ESG reporting matures, reporting frameworks, guidelines and standards are becoming more specific for industries to hone in on the most material topics. The concept of materiality has becoming prevalent across leading ESG reporting frameworks, including the GRI, SASB and CDP. The Global Reporting Initiative sets forth a recommended process by which organisations assess which topics are most material as part of the ESG report development process 66. A leading practice in GRI guidelines use is to include the results of the materiality assessment in the ESG report or on the corporate website as Ford Motor Company has done with its interactive materiality website 67. Examples of published materiality assessments within Travel & Tourism include those from IHG, TUI AG, HSH Group, Kuoni, Air Canada, Asiana, Finnair, Korean Air and Virgin Australia. It is worth noting that the results of past materiality assessments are often embedded in a set of strategic ESG priorities that are also communicated. Companies also consider topics and indicators covered in available GRI sector supplements. As an example, sector supplements have been developed for Airport Operators, Construction and Real Estate and Event Organisers 68. For Airport Operators, additional topics include Business Continuity and Emergency Preparedness, Noise, Service Quality, Provision of Services, or Facilities for Persons with Special Needs 69. For event organisers, additional topics include Food and Beverage, Soft and Hard Legacies and Inclusivity. Additional indicators and disclosures include: Post-event initiatives, outcomes and long-term impacts Types of impacts of initiatives to create a socially inclusive event and create an accessible environment, and Share of F&Bs that meet the organiser s policies or local, national or international standards 70. SASB represents an important development whereby sector-based materiality assessments would inform ESG reporting in financial filings. SASB uses a materiality map in which more than 40 sustainability issues are analysed in the context of the industries in its Sustainability Industry Classification System (SICS) 71 which maps to the Bloomberg Industry Classification System (BICS) 72. SASB has identified ten thematic sectors: Health Care, Financials, Technology & Communication, Non-Renewable Resources, Transportation, Services, Resource Transformation, Consumption, Renewable Resources & Alternative Energy, and Infrastructure 73. For each thematic sector, SASB industry working groups have been established covering a set of industries within the sector. The Travel & Tourism sector is largely grouped within the Services sector. Airlines are grouped within the Transportation sector. The final format and framework used for disclosure requirements should not be the immediate concern of listed Travel & Tourism companies, which can take preliminary steps to prepare for ESG reporting that will ultimately be necessary regardless of the format or medium for ESG reporting (see Section 3 for further guidance) For an example, see the Johannesburg Stock Exchange Guidance Letter on Integrated Reporting dated June 27, Guidance_Letters/Guidance_Letter_Integrated_Reporting_June_2013.sflb.ashx 66 Note that the GRI defines materiality as the threshold at which Aspects become sufficiently important that they should be reported. Beyond this threshold, not all material Aspects are of equal importance and the emphasis within a report should reflect the relative priority of these material Aspects. (Part 2 of G4 Implementation Manual, pp. 11) 67 corporate.ford.com/microsites/sustainability-report /blueprint-materiality-matrix 68 https://www.globalreporting.org/reporting/sector-guidance/sectorguidanceg4/pages/default.aspx 69 https://www.globalreporting.org/resourcelibrary/gri-g4-airport-operators-sector-disclosures.pdfsas 70 https://www.globalreporting.org/resourcelibrary/gri-g4-event-organisers-sector-disclosures.pdf

11 Figure 1.2: SASB Industry Working Group for Hospitality & Recreation Thematic Sector Industry Working Groups Industries Services Hospitality & Recreation (Note: Other services industry working groups cover Consumer Services and Media) Hotels & Lodging Casinos & Gambling Restaurants Leisure Facilities Cruise Lines Incorporating multi-stakeholder feedback, SASB Provisional Standards for the Services and Transportation industry were published in The following key issues per industry were identified as sustainability disclosure topics with associated accounting metrics: Figure 1.3: SASB Disclosure Topics in Provisional Standards 75 Hotels & Lodging Casinos & Gaming Cruise Lines Airlines Energy and water management Ecosystem protection and climate adaptation Fair labour practices Energy management Responsible gaming Smoke-free casinos Internal controls on money laundering Political spending Fuel use and air emissions Discharge management and ecological impacts Shipboard health & safety management Fair labour practices Accident management Environmental footprint of fuel use Labour relations Competitive behaviour Accidents & safety management The CDP is also evolving to further emphasise materiality and may develop sector-based reporting. The concepts behind materiality have been embedded within the CDP information requests for several years, as companies have to report on their prioritisation process and select from a series of potential risks and opportunities. In 2014, the CDP information request included more prescriptive dropdown menus to encourage companies to describe explicitly the degree of materiality for energy, water and climate change to the organisation. The CDP has modules for further reporting for the following sectors based on the General Industry Standards Council (GISC) classifications: Electric Utilities, Multi-Utilities, Oil & Gas Exploration & Production, Integrated Oil & Gas, Oil & Gas Refining & Marketing, Auto Parts & Equipment, Automobile Manufacturers, and Telecommunication Services & Information Technology. The CDP has also added sector-based resources and assigns point-of-contact to companies based on sector. It is expected that the CDP may eventually move to a more sector-based approach through the CDP s Climate Disclosure Standards Board 76, which is working in collaboration with SASB 77. In addition, the GRI has created the Global Sustainability Standards Board (GSSB) that may assist in the aggregation of emerging sector-based reporting standards 78. Announced in 2014, the GSSB will have a separate governance structure to the GRI and be tasked with developing and approving the [GRI s] Sustainability Reporting Standards. With the advent of SASB and more detailed sector-based disclosures, GRI s CEO Michael Meehan has stated that: It s GRI s role to ensure that there is cohesion in the marketplace with standards around the world. 79 Overview of ESG reporting trends Industry-specific collaboration includes the definition of material topics as well as performance indicators. Not only will the increased materiality focus further define specific topics for sectors, but also their related indicators of performance or scale. Sector-specific work within GRI, SASB and CDP all help further refine indicators. Similar work has been initiated and is ongoing in various industries for measurement and calculation of products and services, with potential convergence between this work and information reported through ESG frameworks. As an example, the Sustainability Consortium was born out of the supplier evaluation used in Wal-Mart s Sustainability Index to help manage data and is now a multi-stakeholder organisation with the mission of addressing consumer product sustainability across many industries. The group has over 90 corporate members and is managed by Arizona State University and the University of Arkansas, with affiliations at Wageningen University and Nanjing University. Similarly, the Apparel Index is a qualitative indicator-based tool to help companies assess the environmental sustainability of their apparel and footwear products. Originally released as the Higg Index 1.0 in June 2012, with the 2.0 version released in December 2013, this initiative is based on several other supporting tools within the apparel and footwear industry, including Nike s Environmental Apparel Design Tool. Within Travel & Tourism, the International Civil Aviation Organization (ICAO) developed an industrywide carbon emissions calculation methodology and calculation tool for air travel, and the Hotel Carbon Measurement Initiative (HCMI) developed a standard calculation guidance for carbon emissions from hotel stays. Collectively, these types of measurement initiatives also enable customers to measure and report the environmental footprint of their operations and supply chain at the organisational level Trend 3: Increased attention is being placed on assurance and verification of ESG information Verification is a growing trend, particularly among larger organisations, with 59% of Global 250 companies having at least some of their ESG data assured in 2013 a 13% increase over 2011 levels 80. The leading component of this trend is submitting ESG data, particularly carbon emissions data, for assurance in a similar manner to the auditing process for publicly reported financial data. As part of the verification process, an accredited third party reviews both how the data was collected and what calculations were used. As an outcome of the verification process, the third party provides a level of assurance limited, moderate, reasonable or high based on the standard used to verify the data. For carbon emissions data, leading verification standards include ISO , AA 1000 and ASAE Key concepts include: Market pressures continue to drive increased attention to verification. Assurance is now essentially required to achieve a strong CDP Climate Change score, with up to 17% of total possible points under the 2014 performance score, and 11% of total points under the 2014 disclosure score attributable to assurance 82. In addition, to comply with the GRI G4 Guidelines, the GRI recommends that organisations state Assured or Not assured next to each indicator referenced in the Content Index that accompanies the report. Also, within Bloomberg s ESG platform, users have the ability to search not only ESG data but also whether the data has been assured. Verification is seen to increase the credibility of a company s ESG commitments and management approach. In a 2011 KPMG study, North American companies overwhelmingly cited reinforce credibility among stakeholders as the primary driver behind having data verified and assured 83. The second most common driver is to improve the quality of reporting information. However, it has been found that reports that are GRI-checked or externally assured show errors and are not 100% accurate 84. Verification will eventually lead to better and more accurate reporting. There is a need for better and more accurate reporting, and the verification process has an important role to play. A study conducted by Vienna University of Economics and the Business Institute for Human Resources Management analysed labour and human rights indicators from the GRI framework. Of the 131 companies analysed from Forbes 250, only 11% of 85 of companies that claim to report on labour indicators actually report what they claim to report. For human rights indicators, only 20% of 62% of companies that claim to report this actually report what they claim they do and https://www.globalreporting.org/information/news-and-press-center/pages/gri-forms-new-governance-structure-to-catalyze-sustainability-reporting.aspx 79 Michael Meehan and the future of sustainability reporting https://www.cdp.net/en-us/respond/pages/verification-standards.aspx 82 https://www.cdp.net/en-us/respond/pages/verification.aspx 83 Source: KPMG International Survey of Corporate Responsibility Reporting False Claims in Sustainability Reports. RSS. Sustainable Business Forum, 17 Nov Web. 24 Mar <sustainablebusinessforum.com/elainecohen1/71661/false-claims-sustainability-reports>

12 Another study conducted by Banarra, an Australian sustainability consultancy, also included a similar analysis of ten Australian companies, which reported similar results to those of the Viennese study. In 2011, Leeds University and the Euromed School of Management conducted a study of over 4,000 sustainability reports in which the data being reported within these reports was thoroughly examined. The study revealed unsubstantiated claims, gaps in data and inaccurate figures 85. Examples include an energy company reporting carbon emissions equivalent to four times the planet s entire carbon footprint; an automobile company reporting more waste generated at its facility than exists on the planet; and parent and subsidiary companies not reporting on their most material environmental topics and data because they assume the other will claim and report it. Mandated integrated reporting will be a game changer, driving widespread assurance practices. Should integrated reporting be mandated either by nations or stock exchanges, it is expected that verification of ESG become the norm, given that the ESG data will be reported alongside financial data. In the meantime, market pressures continue to increase demand for ESG data assured. Small- to medium-sized and non-public companies may be impacted by the trend toward verification. The G4 Guidelines includes new indicators on the percentage of new suppliers each year that are screened for environmental, human rights, and practices in addition to impacts on society. For companies that seek to have this data point verified and then assured, the screening process will need to be documented and in some instances may require additional rigour. In addition, the CDP Climate Change Information Request asks companies if they receive greenhouse gas emissions data from their suppliers. As verification becomes more mainstream, corporate purchasers may ask not only Can you provide your greenhouse gas emissions? but also Have you had them assured? Trend 4: Increasing focus is placed on an organisation s supply chain. The supply chain has always been part of a company s ESG reporting and strategies. In recent years, however, a greater emphasis on supply chain responsibility has emerged driven in part by the G4 Guidelines addition to four new supply chain aspects: Supplier Environmental Assessment, Supplier Human Rights Assessment, Supplier Labour Practices Assessment, and Supplier Impacts on Society Assessment. As part of the G4 process, organisations have to assess whether these aspects are material to them or their stakeholders with suppliers often considered as key stakeholders. In addition, within the CDP Information Request, companies have to disclose not only their direct risks but also those in their supply chain, in addition to describing ways in which they are engaging with their suppliers on energy, climate change and water issues. Within the field of ESG, an organisation s supply chain is perceived as an area of greatest impacts, risks and opportunities across sectors. This includes Travel & Tourism, where the supply chain has been said to for up to 76% of the impacts associated with travel and leisure 86. There are several examples of companies leading the way for sustainable supply chain innovations across different industries. As an example, Wal-Mart s Integrated Sustainability Index, in partnership with the Sustainability Consortium, now encompasses 300 product categories across 5,000 suppliers, with that number growing each year. Through the index and settling goals for suppliers, Walmart aims to reduce fertiliser use on agricultural products for 14 million acres of US farmland by 2020 and expand the index efforts in its Chilean and Mexican markets 87. Unilever holds a unique position in the consumer goods industry, as a company that integrates life-cycle analysis with its strategic sustainability goals. Unilever has a goal to halve water associated with consumer use in their products by This goal is achieved through efforts to create innovate products that reduce water use at the consumer end, but also to reduce water used to create that product in the manufacturing phase all of which factors into a products life-cycle analysis within the supply chain 88. Nike has invested in developing a waterless dyeing technology to manufacturer its textiles, which will significantly change the textiles industry 89. Timberland not only audits and ensures vendor sustainability through environmental, social and labour management audits, but also reports results regarding these audits on a quarterly basis 90. Nestlé was also one of the first movers to pledge to source sustainable palm oil for its supply chain. Palm oil is found in many food and consumer goods products and is driving rapid deforestation 91. Overview of ESG reporting trends Key concepts include: ESG reporting is being used as a means of reducing questionnaire fatigue in supplier evaluation. The increased focus on an organisation s disclosure regarding its supply chain risks, impacts, management approach and indicators itself carries the largest implication for the future of ESG reporting. This stems from an organisation being asked by its customers or investors the basic ESG-related question: What does your organisation do to evaluate its supply chain? To improve its response to that question, the organisation relies on its own supply chain evaluation process, consequently requesting similar ESGrelated information from its own suppliers. Historically, organisations recognised for innovative supply chain initiatives developed their own internal criteria and evaluation process. As the practice became more commonplace among large corporations and investors, companies began to face dozens, even hundreds of surveys or questionnaires from customers and investors containing similar information. Inhouse and third-party data platforms were developed to cope with the resulting data collection needs. It was also questionable as to what degree the information was actually analysed and used, as against just being collected for the sake of asking questions as a form of good supplier evaluation. As a result, common ESG reporting can streamline and simplify the supplier evaluation process if companies collectively report the same information in a common format. Microsoft is recognised as having contributed to this trend when the company asked approximately 20 suppliers to use GRI s Disclosure on Management Approach framework to report on how they meet the standards in Microsoft s Vendor Code of Conduct, which includes coverage of environmental and social issues such as business ethics, labour and human rights, and respect for intellectual property 92. Common ESG metrics are used to streamline supplier evaluation processes. Standardised ESG reporting also emerged as a streamlined solution to supplier (and investor) evaluation. Companies realised it was easier for them to commit to a handful of specific practices and simply request a supplier s GRI report as a best practice, themselves recognising the internal benefits derived from sustainability reporting, rather than attempting to re-invent the wheel of evaluating suppliers at an organisational level. Moreover, responding companies began to produce ESG reports and refer more directly to those reports or their content in their responses to supplier evaluation surveys. This was the period coinciding with much of the increase in GRI reports in Travel & Tourism, in line with the emerging need to provide information to institutional investors and corporate travel buyers. As this trend continues and reporting becomes more prevalent, Travel & Tourism companies will begin to answer the same question, which will ultimately result in similar requests for information within the Travel & Tourism supply chain. Challenges still persist because supply chains are diverse, complex, and encompassing. The supply chain encompasses companies large and small, and broad ESG reporting frameworks are not always a good fit for SMEs, as was discussed earlier. This will result in more simplified emanations of reporting guidelines and increased use of standards that encompass the key topics at the organisational and product/service level Trend 5: Harmonisation of information means applying specific concepts and issues rather than frameworks Although reporting will increase, it is highly unlikely, given the other trends mentioned above, that one specific sustainability standard will satisfy the reporting needs of all Travel & Tourism businesses of various sizes globally especially since inherent competition will continue to exist between framework bodies and standards. This leads to the fifth trend identified in this report, since the application of key reporting concepts and inclusion of common issues themselves can at least become harmonised. In short, all businesses could follow some type of reporting process and disclose content on a set of common issues. We are likely to see a general shift of focus away from the frameworks themselves and more on the discussions of key topics. As the current trends involve identifying a set of industry-specific material topics and reporting on the respective risks, opportunities, management approach, and generally accepted key performance indicators for those topics, information is becoming increasingly harmonised across leading ESG frameworks. Each framework may serve a distinct from, but often complementary to, purpose than the others. These frameworks may also compete for investor audiences and strive to fulfil their own business models. 85 Doing good - or just talking about it? Society News. University of Leeds, 25 Nov Web. 14 Apr GreenBiz Group Inc. State of Green Business 2014, pp. 40, Walmart Highlights Progress on the Sustainability Index. Walmart Corporate. N.p., 12 Aug Web. 24 Mar <news.walmart.com/news-archive/2013/09/12/walmarthighlights-progress-on-the-sustainability-index>. 88 Our Water Footprint. Unilever. N.p., n.d. Web. 24 Mar <www.unilever.com/sustainable-living/water/footprint/index.aspx>. 89 NIKE, Inc. Announces Strategic Partnership to Scale Waterless Dyeing Technology. NIKE, Inc. N.p., 7 Feb Web. 24 Mar <nikeinc.com/news/nike-inc-announcesstrategic-partnership-to-scale-waterless-dyeing-technology>. 90 Supplier Sustainability. Timberland Responsibility. N.p., n.d. Web. 24 Mar <responsibility.timberland.com/factories/supplier-sustainability/>. 91 Palm Oil Scorecard: Ranking America s Biggest Brands on Their Commitment to Deforestation-Free Palm Oil. Union of Concerned Scientists, 3 Mar Web. 24 Mar <www.ucsusa.org/global_warming/solutions/stop-deforestation/palm-oil-scorecard.html>

13 Leading ESG Standards, Guidance, and Frameworks Environmental, Social and Governance Reporting for the Travel & Tourism Sector Table 1.4: Distinctions across Leading ESG Standards, Guidance and Frameworks GRI CDP IIRC <IR> Framework Investor Listing Standards Proposal 93 SASB Overview of ESG reporting trends Furthermore, the variations found across emerging ESG reporting guidelines from different countries and market regulators will inhibit the global adoption of one single, all-encompassing framework as is currently held de facto by the GRI. Thus it is often in the interests of ESG frameworks to join together, as well as create links to other relevant and related initiatives, to ensure validity and viability. Several examples of major linkages and MOUs have been put forth in the past few years, including the following: The GRI and CDP aligned to collaborate in the development of sector supplements and to give feedback on each other s guidelines and questionnaires. This leads to a more efficient reporting process 95. Disclosure content Disclosure format Scope of use Topics covered Self-defined Voluntary report (stand-alone or annual) All organisations globally (more tailored toward large companies) Disclosures on management approach and indicators across six categories: economic, environmental, labour practices and decent work, human rights, society and product responsibility Sector-defined (in specific instances) Information request Global, targeted toward Fortune 500 companies In-depth reporting on strategy, governance, engagement, risks, opportunities and performance in targeted climate change, water and forests information requests Self-defined Annual report Global, companies currently producing annual financial reports Discussion on value creation over time to protect and generate financial, manufactured, intellectual, human, social and relationship and natural capital Self-defined (including comply or explain option Investor filings and comply or explain ESG disclosure Global, listed companies on stock exchanges Materiality assessment disclosed in annual financial filings, specific ESG disclosure, on a comply or explain basis, on 10 key ESG topics; hyperlink in annual financial filings to an ESG disclosure index (using GRI or equivalent) Sector-defined Investor filings US publicly traded companies filing with the SEC Disclosures on industrydefined risks and performance indicators The GRI and UNGC aligned their work to advance corporate responsibility and transparency, and support an increasing number of companies and stakeholders 96. The GRI and IIRC have signed an MOU to collaborate on the continued mission of integrated reporting and sustainability reporting. They understand the complementary role both frameworks play in increased reporting transparency 97. SASB and the IIRC aligned work to advance the development of corporate disclosure and to communicate value to investors 98. SASB and CDP signed an MOU to increase support for standards relating to climate change disclosure and to support the determination of material topics involving climate change 99. The IIRC and CDP aligned to help accelerate advancement towards a resource-efficient economy 100. The GRI has put forward linkage documents to help organisations relate the specific reporting criteria to those of the CDP and UNGC. In addition, the GRI has aligned and proposed similar linkage documents with ISO and the OECD Guidelines for Multinational Organisations 101. The GRI is one of the first sustainability reporting frameworks to introduce tagging sustainability reports with XBRL taxonomy. This tagging allows for easier access to information and provides a more efficient means of analysing reports 102. IASB and IIRC signed an MOU that recognises the support from both organisations on the importance between integrated reporting from all facets, including financial, governance and sustainability reporting 103. Definition of materiality Information that may reasonably be considered important for reflecting the organisation s economic, environmental, and social impacts, or influencing the decisions of stakeholders Materiality concept is implicit through the information requests and instead requests disclosures on predefined risks and opportunities that have the potential to generate a substantive change in your business operations, revenue, or expenditure. A matter is material if it is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organisation s ability to create value over the short, medium and long term. Topics that have a direct or indirect impact on an organisation s ability to create, preserve, or erode economic, environmental, and social value for itself, its stakeholders, and society at large. 94 Information is material if a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of the information made available. IIRC and IFAC signed an MOU whereby both organisations recognise that collaboration between accountants and integrated reporting is essential to the success of increasing participation 104. IIRC and GISR signed an MOU that both organisations agree on the continued collaboration between reporting and ratings standards among reporting frameworks 105. Looking forward, this web of linkages will collectively catch all issues, performance indicators and reporting methods that end up being encouraged or mandated across the world. Likewise, further prescriptive guidance on disclosure of approaches and performance to relevant issues and key topics will unfold in the short term. Given these trends, the fundamental recommendation for companies to address ESG reporting is to first focus on the premises and concepts of reporting, including the data collection systems and internal content development/maintenance processes as per the key ESG issues that affect their business. Sector distinctions Sector may inform list of material aspects disclosed in G4; sector supplements developed for use when applicable Limited sector modules available for; leaders identified across sectors and annual report identifies performance and trends within sectors Sector may inform content reported but philosophy is more principlesbased than rulesbased, and thus not prescriptive based on sector classification Sector-based initiatives may inform results of materiality assessment and disclosures provided in GRI or equivalent content indexes Sector-based reporting is pre-determined by standards development by Industry working groups representing all sectors in SASB s classification system 93 Adapted from Ceres Investor Network on Climate Risk. Investor Listing Standards Proposal: Recommendations for Stock Exchange Requirements on Corporate Sustainability Reporting, March See Global Reporting Initiative. Materiality in the Context of the GRI Reporting Framework. Available online at https://www.globalreporting.org/reporting/g3andg3-1/ guidelines- 95 Linking up GRI and CDP. CDP. N.p., n.d. Web. 28 Mar <https://www.cdp.net/en-us/whatwedo/cdpnewsarticlepages/linking-up-gri-and-cdp.aspx 96 UNGC and GRI Partnership. CDP. N.p., n.d. Web. 28 Mar <https://www.globalreporting.org/information/about-gri/alliances-and-synergies/pages/ungc-and-gri.aspx> 97 Integrated Reporting. Integrated Reporting. N.p., n.d. Web. 31 Mar <https://www.globalreporting.org/information/current-priorities/integrated-reporting/pages/default. aspx> 98 SASB and IIRC Announce Memorandum of Understanding. The IIRC. N.p., n.d. Web. 28 Mar <www.theiirc.org/2014/01/16/sasb-and-iirc-announce-memorandum-of-understanding/> CDP, CDSB and IIRC Announce Collaboration to Accelerate Integrated Reporting. The IIRC. N.p., n.d. Web. 30 Mar <www.theiirc.org/2013/07/18/cdp-cdsb-and-iircannounce-collaboration-to-accelerate-integrated-reporting/> 101 Working Together for a More Transparent Future: An Update on GRI Linkage Documents. GRI, n.d. Web. 09 Apr <https://www.globalreporting.org/information/newsand-press-center/pages/working-together-for-a-more-transparent-future-an-update-on-gri-linkage-documents-.aspx>. 102 XBRL. GRI, n.d. Web. 09 Apr <https://www.globalreporting.org/reporting/reporting-support/xbrl/pages/default.aspx>. 103 IASB and IIRC to Cooperate on Integrated Reporting. Accountancy Live, 8 Feb Web. 09 Apr <https://www.accountancylive.com/iasb-and-iirc-cooperateintegrated-reporting>. 104 IFAC and the IIRC Sign MoU on Cooperation, Collaboration For IR IFAC. Press Releases/News Alerts. IFAC, 17 Oct Web. 09 Apr <www.ifac.org/newsevents/ /ifac-and-iirc-sign-mou-cooperation-collaboration-ir>. 105 IIRC and GISR Agree to Cooperate on Corporate Reporting and Ratings Frameworks. IAS Plus. Deloitte, 1 Apr Web. 09 Apr <www.iasplus.com/en/ news/2014/04/iirc-gisr>

14 1.6 Industry Outlook, Implications and Opportunities A new stage of ESG reporting more data-driven and with greater regulation Several key trends influencing ESG reporting have been identified in the first section of this research. Overall, it can be argued that ESG reporting has evolved in three stages over the past few decades. In the first stage, the earliest forms of reporting were found among companies that had the most environmental and social criticisms. Language was heavily focused on public relations, corporate social responsibility was highly philanthropic, and much of the reporting was done internally within organisations for purposes other than external stakeholder communications. 1 st Stage 2 nd Stage 3 rd Stage PR Philantrophy Because we care Internal Reporting External reporting is leadership Just asking for it Pushed by Reporting community Less attention on content, quality and performance Everyone reports Convergence with strategy, performance Key metrics, risk & impact Comparison, fair or not Introspection on why to report Ok, what next? Overview of ESG reporting trends External pressures will stimulate further action These three stages of reporting are also analogous to every organisation s internal dialogue and use of reporting. The majority of Travel & Tourism businesses will need to begin addressing ESG reporting at the first stage. The opportunity for those Travel & Tourism companies with more mature reporting systems will be to further collaborate on common topics, metrics and resources to help stimulate the rest of the sector to move towards the new stage, so that Travel & Tourism collectively can be appropriately evaluated as a sector in terms of its contributions to the economy and impacts on the environment and society. If the current trajectory of ESG reporting continues, a significant increase in reporting will be seen across Travel & Tourism organisations in the coming years. By the end of 2014, only 17% of the identified companies and just over one half of all WTTC members had reported or responded to ESG frameworks. External pressures from investors, customers and regulators will continue to increase. This research aims to provide a foundation for reporting for those seeking orientation and guidance. As Travel & Tourism companies progress in developing and improving their reporting processes, they will also recognise the need to focus on providing clear information that can be benchmarked against that of their peers, as well as ensuring that the sector overall can be compared with, and benchmarked against, other sectors. The wealth of content will increase and a common sector voice will emerge to support reporting needs. Arguably, every sector is different, but the particulars of Travel & Tourism should be expounded for proper ESG analysis. In the past, the ESG analysis community did not clearly understand (and arguably still does not) the business models or metrics of Travel & Tourism industries. As an example, hotels and tour operators were placed in the same competing subsector as restaurants in the DJSI until recently. In addition, ESG analysis firms did not understand the fragmented business model often found in the hotel industry, and would pejoratively evaluate lodging Real Estate Investment Trusts (REITs) for a lack of programmes and disclosure, despite their not having operational control of the hotels (and in some cases being legally restricted from action). WTTC s Sustainability Working Group members supporting this research also offered anecdotal stories of data analysis firms inaccurately estimating their energy, water and carbon data by a factor of as much as ten. ca With the advent of the predominant frameworks, the 21 st century saw the transition to the next phase, marked by an overall push by several constituencies to increase reporting among business. The reporting focus shifted attention to stakeholders and their information requests. Internal processes for data collection started to develop, and the emergence of ESG gave companies the framework to demonstrate leadership and stand out for their efforts. Likewise, a significant reporting community was born, itself helping propagate the reporting trend. The value of reporting processes was a common discussion, and empirical analysis began to demonstrate that companies that disclosed their approach and performance to ESG issues (with disclosure a proxy for performance) outperformed non-reporters. The current mainstreaming of reporting and, in turn, sustainability, as outlined in the prior sections of this research, point towards a new stage of ESG reporting. This stage will be marked by ubiquitous reporting, a deeper analysis of the management approach and content, and a convergence with business strategy, as the pressing issues around ESG further stress the business models of organisations across sectors and specifically within Travel & Tourism. Reporting will be more regulated and more data-driven. The sea of content will force stories to be told better, more authentically, and more relevantly to avoid fatigue. Introspectively, companies that have been reporting for over a decade will be able to take an introspective look to find where the true value of reporting lies, and how that value can be maximised (with other efforts minimised). Companies will also not be able to hide their performance, as they will be held accountable to some degree over the multitude of targets that have been set in the coming decade. Some organisations will be able to demonstrate real progress, while others will continue lagging behind, publishing little more than glossy reports. The analysis of the information reported, however, will also become more astute, and the focus will shift to the actual strategy, with the programmes and performance of organisations evaluated in the same way that financial analysis is conducted, converging with the concept of value. Also important, although less specific to Travel & Tourism, is the need for a common understanding of ESG disclosure in the Services sectors. It can be argued that the GRI and some of the CDP responses have their frameworks skewed toward companies that produce goods. The term locations of operations can easily exceed 100 for travel companies, and data capture systems are more cumbersome. Similarly, training is an intrinsic concept in the service industries, with training a key operating procedure and focus of the majority of Travel & Tourism businesses so inherent that most of it is not formally tracked. Should companies be required to start tracking each instance of training, including daily 10-minute operational briefings? Further topic discussion, collaboration and research can help provide awareness of the nuances of these types of issues within Travel & Tourism. On the other hand, Travel & Tourism will have to increase attention to key labour topics that may be highly relevant and impactful to the business and stakeholder, but not reported, either because of an unwillingness to publicly state information, or a lack of data capture mechanisms Reporting efforts within industry associations and organisations Generally speaking, ESG reporting at an organisational level has not been addressed within or between industry trade associations or groups, although initiatives exist that cover components related to reporting. These include common performance measurement, specific initiatives, guidance and commitments to environmental stewardship and social responsibility, and engagement exercises, and are generally specific to a product or service rather than an organisation. By way of example, the Pacific Asia Travel Association (PATA) has a Sustainability and Social Responsibility Committee that has announced efforts to help members meet disclosure requirements through a sustainability index 106. In 2012, the Global Business Travel Association (GBTA) released its Key Performance Indicators for Managing Corporate Travel, which included indicators of carbon emissions, termed carbon visibility, as well as comparisons of travel using rail versus air (with rail being environmentally preferable to air travel in their KPI). This was followed in 2013 by its Hotel Request for Proposal (RFP) including 20 questions relating to sustainability ranging from certification to metrics and data reporting on energy, water, waste and carbon. 106 pata.globalsustainabilityindex.com/en/terms.php, accessed March 11,

15 ICAO has developed a carbon calculation methodology and calculator that can be used to calculate carbon emissions from air travel 107, and this has been supported in policy advocacy through IATA for a global sectoral approach to aviation carbon emissions 108. Similarly, in lodging, a group of 25 hotel companies, together with WTTC and the International Tourism Partnership (ITP), developed the Hotel Carbon Measurement Initiative (HCMI) to publish a freely available, standardised carbon calculation method 109. Building on the HCMI, 12 hotel companies worked with Cornell University to release a hotel sustainability benchmarking study that provides benchmarks for energy and carbon emissions in hotels across major US markets, as well as at country level for a handful of countries 110. In these instances, the common methodology and calculations serve the needs of those reporting data, as well as other entities using this data in their own reporting. Where common intersections are found, further guidance on calculation and normalisation is beyond carbon calculation. By way of example, the term local has a wide-ranging connotation and use across the sector. Initiatives to standardise calculations of carbon have emerged, but dozens of other performance metrics and indicators will need to be similarly evaluated. These initiatives with larger trade associations help provide common language or advocacy but, as ESG disclosure shifts to national-level requirements through stock exchanges or government mandates, the national-level trade associations within specific countries will ultimately be more willing to support sector needs or address policy within each specific country. At present, at both national and multinational levels, the topic of ESG reporting has not been particularly addressed within travel industry associations and working groups in general. In addition to supporting performance measurement for carbon, these groups could provide benefit to members by increasing resources, adopting collaboration efforts, and providing support to help companies approach the wide spectrum of reporting. Topics and performance indicators relating to ESG reporting also can be encompassed by a larger trend, termed non-financial reporting. This trend carries with it the global discussions of moving beyond GDP towards more importance on measuring quality of life. Given the nature of Travel & Tourism and its range of influence on travellers and host communities, the historically academic study of travel s relation to quality of life may become more mainstream as well. Furthermore, sector discussions, initiatives and performance measurement currently focused on ESG may evolve to address the importance of Travel & Tourism as a key indicator in one s quality of life and well-being. The opportunities for collaboration will also continue to grow, and these can be leveraged to stimulate positive change and key initiatives to help attain better performance once parameters are commonly defined. Travel & Tourism needs a collective voice to help define and build awareness around ESG reporting. This research will hopefully represent the first important steps in that convening exercise. Section 2: ESG Reporting in Travel & Tourism ESG REPORTING IN TRAVEL & TOURISM 2.1 Prevalence of Reporting Environmental, Social and Governance (ESG) reporting within the Travel & Tourism sector has seen considerable uptake in recent years although, while now quite common, it is not yet mainstream. Figure 2.1 below highlights the growth trend of the number of reports globally over the past 14 years. Figure 2.1: Sustainability Reporting within Travel & Tourism, Number of reporters Source: Greenview Since the value chain of Travel & Tourism has considerable reach, it is not easy to determine which reporting entities can be considered to sit within the sector. Figure 2.1 was generated by scanning airlines, hotel management companies/brands, cruise lines, large tour operators, global distribution systems (GDSs) and technology providers whose main focus is Travel & Tourism, and which have either produced a sustainability report (stand-alone or integrated financial and sustainability report), responded to the Carbon Disclosure Project (CDP) survey, or published a Communication on Progress (COP) as a result of having signed the UN Global Compact. It includes subsidiary companies that report, as well as parent brands. Reporting among WTTC members is much more prevalent. By the end of 2014, 55% of WTTC members within the same industries had reported. Industry Segment WTTC Members WTTC Reporters % of WTTC Members Reporting Airlines Hotels Carbon Emissions Calculator. International Civil Aviation Organisation, n.d. Web. 02 Apr <www.icao.int/environmental-protection/carbonoffset/pages/default.aspx>. 108 Fact Sheet: Global Sectoral Approach for Addressing Aviation Carbon Emissions. IATA, Dec Web. 11 Mar <https://www.iata.org/pressroom/facts_figures/ fact_sheets/pages/emissions-approach.aspx>. 109 Hotel Carbon Measurement Initiative. WTTC, n.d. Web. 02 Apr <www.wttc.org/activities/environment/hotel-carbon-measurement-initiative/>. 110 Chong, Howard C. and Ricaurte, Eric E. Hotel Sustainability Benchmarking. Cornell Hospitality Report (May 2014) <www.hotelschool.cornell.edu/research/chr/pubs/ reports/abstract html>. 28 Cruise Lines Tour Operators GDSs

16 Reporting is becoming more widespread throughout the sector and is by no means limited to these industries or to large publicly traded companies, with examples found all across the value chain. Owners of tourism-related real estate are reporting. Nearly all forms of transport companies are reporting, including rail, bus and rental car firms. Rail and transit transport companies are also reporting, eg the Hong Kong Mass Transit Railway (MTR) is a longstanding reporter, as are the Korea Rail Network Authority and Renfe in Spain. Beyond the GDSs, other technology and distribution entities are reporting, although the practice is infrequent among online travel agencies (OTAs). A growing number of airports have begun reporting, including Dallas-Fort Worth International Airport, Orlando International Airport, Incheon Airport, and Athens International. Some convention centres, such as the Amsterdam RAI in the Netherlands and Cape Town Convention Centre in South Africa, have also reported. Comprehensive reporting is commonly found among large corporate, trade show and association conference event organisers that have established sustainability programmes. These include the US Green Building Council s Greenbuild Conference, the International AIDS Conference, the American Chemical Society s National Meetings & Exhibitions and Oracle s OpenWorld, as well as the several conferences of the United Nations. Even tourism organisations such as CVBs, DMOs and NTOs, have begun reporting, with examples including the Abu Dhabi Tourism Authority, Visit Sweden and the Korea Tourism Board, which publish Global Reporting Initiative (GRI) reports. Within a destination, many service providers in addition to ground transport operators, including restaurant chains, are part of larger companies that report. Major attractions have reported, such as Walt Disney, the Sydney Olympic Park Authority and Zoológico de Barranquilla in Colombia. The trend of reporting raises a significant question: How much further will reporting in Travel & Tourism increase, and to what limits? Given the current status, it is difficult to define who could or should be reporting. Some major travel companies do not report, while other smaller entities report, even though they are not publicly listed and do not have corporate travel buyers or governments putting pressure on them to do so. 2.2 Related Sector Initiatives For the current benchmarking exercise, WTTC used as a base Bloomberg ESG data on companies within what it specifies as the travel, lodging and dining sector. Dining and catering/f&b companies were removed from the list, and all non-listed WTTC members were added, along with companies that have global portfolios within the hotel, airline, cruise, tour operating and GDS sectors. This created the following universe of potential reporters, with the corresponding prevalence of reporting: ESG Reporting in Travel & Tourism 2.3 Report Content and Components Using the current benchmarking exercise, several insights are also offered into the type of information being reported. Frequency of topics reported, use of goals and targets, and disclosure of risk are highlighted below. Further information can also be found in the guidance section. Although 113 companies within the boundary set for the benchmarking exercise had published at least one sustainability report by the end of 2014, the breadth and depth of information varied significantly. The length of reports ranged from 16 pages, the shortest, to 427 pages, the longest, with the average at around 70 pages. Length is not necessarily an indicator of report quality, although this is a common perception. The Bloomberg ESG score, for example, is calculated purely based on the amount of information publicly available, and not the performance of the organisation in addressing ESG topics. Furthermore, integrated reporting is often seen within the reporting community as a leading practice, although integrated reports may have less ESG-related content than GRI reports. At present, only a handful of Travel & Tourism companies have published what could be considered as integrated reports. These include Sol Meliá, Iberia, Qantas, Virgin Australia, Southwest Airlines and French companies following the Grenelle Act, such as Accor. Report benchmarking also requires the setting of boundaries and thresholds. It is interesting to note that 24% of Travel & Tourism reporters do not currently cite a particular reporting framework for their sustainability reports. By way of example, MGM Resorts International and Qantas publish reports but do not currently use GRI. Disney, Royal Caribbean and TUI all have adopted GRI in recent years, but reported in previous years without declaring GRI alignment. And some companies, such as British Airways, have reported using GRI in the past, and continue to publish sustainability reports, but have since ceased to declare a GRI level or include a content index. Starwood Hotels & Resorts, for example like some other companies has consistently responded to the CDP climate change response, but only recently published its first sustainability report. From an analyst s point of view (which is often a key audience in the ESG reporting industry), a GRI content index is an essential component for understanding, evaluating and rating/ranking a company as it streamlines the data collection process and facilitates some level of comparability. Furthermore, it helps set a general benchmark for the depth and breadth of content needed for a document to be considered as ESG reporting. (Some companies have published two-page CSR reports that were not counted as ESG reports.) Figure 2.2: Sustainability Reporting in Travel & Tourism by GRI Application Level Industry Segment Universe of Potential Reporters # with Bloomberg ESG Score # with GRI Content Index # with CDP Response a % Reporting through 2014 b GRI Level % of Reporters Airlines % Lodging c % Cruise Lines % Tour Operators % GDSs d % Total % a Includes Investor CDP, CDP Water, and CDP Supply Chain. b Publishing reports through 2014, which uses 2013 or prior calendar data. c Including hotels, resorts, timeshare and gaming hotels. Excluding lodging owner entities whose primary business model is real-estate investment or asset management. d Not including OTAs. Source: Greenview Without including all the other types of organisations within the sector s value chain, it is clear that the majority of tourism businesses are not reporting and that significant increases could be achieved. Extending this analysis throughout the other areas of Travel & Tourism also proves interesting, with similar results. By way of example, over 30 airports have published sustainability reports, which would make them a significant group of reporters in Travel & Tourism in aggregate when compared to the other industries above. On the other hand, if compared with the hundreds of airports in existence, they would represent the smallest share of reporters within their respective universe. G4 16 Core 12 Comprehensive 1 Level undeclared 3 G3 or G A/A+ 7 B/B+ 14 C/C+ 11 Level undeclared 27 No GRI reference 25 However, the current trend is a move away from quantity to quality of reporting. Prior to the introduction of G4, the GRI guidelines had three levels of disclosure based on the amount of information reported using the framework. These were assigned A, B, and C, which indicated the respected levels of content required to be covered. Among the benchmarked companies, most were reporting at C level, with longer-term reporters tending to increase to level A. The G4 guidelines have done away with levels, instead moving towards two types of designations, core and comprehensive, which refer to how closely the report applies the complete framework guidelines. Regarding the information disclosed within GRI reports, specific types of common information can be found material topic identification, stakeholder engagement mechanisms, governance disclosure, disclosures on management approach (DMA), and indicators of performance or scale. Using the benchmarked sector reports with a GRI content index, some general trends and aggregate information are provided below

17 2.4 Key Issues Environmental, Social and Governance Reporting for the Travel & Tourism Sector Stakeholders and stakeholder engagement A fundamental premise of sustainability reporting is that information reported is relevant to the organisation s stakeholders. Just exactly who is represented as stakeholders across the Travel & Tourism sector varies from one industry to another. Figure 2.3 below shows a breakdown of stakeholder groups identified in Travel & Tourism reports. Figure 2.3: Frequency of Stakeholder Groups Identified in Travel & Tourism Sustainability Reports Stakeholder Group Airlines Hotels Cruise Lines TourOperators GDS/Tech Employees/Associates/ Colleagues/Team Members 63% 71% 80% 50% 100% Supply Chain/Suppliers 41% 50% 60% 50% 100% Guests/Customers/Corporate Clients/Passengers/Consumers 66% 57% 80% 50% 50% Shareholders 41% 32% 40% 33% 50% Investors 53% 25% 40% 33% - (Property) Owners and Franchisees - 29% Business Organisations/Industryspecific Organisations/Peers/ Industry and Trade Associations 22% 18% 20% 17% 50% Government(s)/Governmental Organisations 41% 4% 80% 33% 50% ESG Reporting in Travel & Tourism Several groups are commonly found, such as shareholders, employees, local communities, customers, suppliers and organisations of civil society. These are also found in the GRI guidelines as examples of main stakeholder groups 1. The results demonstrate how certain groups will be more relevant to some industries than others. For example, port destinations are a common stakeholder group specific to cruise line operators, and gaming boards will be relevant to organisations that operate casinos. Customers may be split according to the various guest/customer segments, and business units of the organisation may require other groupings, such as franchisees and timeshare owners. Slightly over half of all reporting companies displayed identifiable stakeholder engagement mechanisms (such as surveying, interviewing, panel discussions) to gain feedback or insight to key topics or report content/quality. This does not imply that the other half do not engage stakeholders, as some form of engagement exists with most stakeholder groups in all organisations (eg investor calls are a form of engagement). However, when it comes to identifying and discussing the organisation s influence and impact on ESG issues relevant to those stakeholders, the practice is still relatively nascent within reporting companies in the same way as reporting itself is within the Travel & Tourism universe Risk disclosure Assessment and disclosure of risks relating to environmental and social issues are increasingly gaining importance, especially with the effects of climate change growing more evident. The CDP surveys perhaps provide the most detailed example of risk disclosure in voluntary ESG reporting. In collaboration with the CDP, a Travel & Tourism benchmarking exercise demonstrated how risks are currently being assessed. Figure 2.4: Commonly Disclosed Risks and Opportunities within Travel & Tourism 2 Most Common Climate Risks Discussed in CDP Responses Most Common Climate Opportunity Drivers Identified in CDP Responses Business Partners 13% 18% - 17% 50% Communities/Community Organisations 38% 32% 40% 17% - Local Communities/Home or Destination Ports 7% Regulators 9% 4% - 17% - Media 13% 7% 60% 17% - Global Partners/Strategic Partners - 7% Academic Institutions/Universities 9% 4% - 17% 50% Tour Operators Hotels Energy efficiency Mandatory carbon reporting, Energy efficiency, Flooding, Mandatory water efficiency/conservation/ Recycling/Process standards, Declining water quality, Increased water stress or scarcity Emissions reporting obligations, Product labelling regulations & standards, Product efficiency regulations & standards, Carbon taxes, Fuel/Energy taxes & regulations, General environmental regulations, Cap and Trade schemes NGOs/Non Profits (Including International Organisations relating to Sustainability, Environmental, Humanitarian and Development Issues) 38% 25% 80% 50% - Cruise Lines Energy efficiency, Mandatory carbon reporting Cap and trade schemes, Fuel/Energy taxes & regulations, Product efficiency regulations & standards, Emissions reporting obligations Authorities 19% 4% % Society/the Public 16% 4% - 17% 100% Environment 6% 11% % Travel Professionals/Travel Agents % - - Airlines Carbon tax, Cap and trade, Investment in low carbon fuels Cap and trade schemes, International agreements, Emission reporting obligations, Fuel/Energy taxes & regulations Distributors 3% 4% 20% - - Licensees % - - Factories % - - Retailers % - - Contract Workers/Contractors 3% 4% 20% - - Only four companies participated in the CDP Water Disclosure in 2013 while, in comparison, the sector has 36 participants engaged in CDP Climate Change Disclosure. Researchers & Rating Agencies 6% 4% 20% - - Science & Research/Scientific Community and Research Experts 9% - 20% - - Trade Unions 13% 4% Financial Analysts % - Other stakeholder groups identified but found in less than 5% of reports include: Lenders, Tenants, Tourists, Restaurants, Sporting Bodies, Venue Operators and Visitors, Professional Associations and Bodies, Certification Authorities, Airports, Air Navigation Service Providers, Business and Leisure Travellers, National and Industrial Representations, Auditing Bodies, Farmers, Provincial Authorities, Gaming Boards, Liquor Boards, Rating Agencies, Competitors, Local Government Representatives/Elected Officials and Timeshare Owners. Airlines, Hotels and Tour Operators were also listed as various Travel & Tourism industries can be stakeholders for each another. 1 G4 Sustainability Reporting Guidelines Implementation Manual. Rep. GRI, n.d. Web. 9 Apr Prepared using data provided in partnership with the CDP 32 33

18 2.4.3 Goals and targets A common component of reporting is the use of goals and targets. These may be quantitative or qualitative, with varying uses. The GRI guidelines ask for a company to disclose its goals and targets as part of its DMA for the reported aspects. Furthermore, the CDP questionnaire asks specific questions on the organisation s quantitative targets on greenhouse gas (GHG) emissions and water reductions. All benchmarked companies within Travel & Tourism indicated they were setting some kind of goal/s. However, only a fraction of these said they had set specific targets. ESG Reporting in Travel & Tourism IHG s GRI reporting contains disclosure about a management approach to commissioning research to study the economic impacts of the company and the industry with highlights of indirect employment and business sales reported for the USA, UK and Brazil 7. American Airlines GRI report contains linkages to an economic impact analysis the airline conducted for the economic value it generated in every state in the USA 8. Korean Airlines includes an infographic relating the economic value distribution to specific stakeholders. Figure 2.5: Korean Air Economic Value Distribution to Stakeholders Source # Set a GHG Target Set an Energy Target Set a Water Target Set a Waste Target Sustainability report CDP response 38 Climate change, 4 Water 15 of 38 n/a 4 of 4 n/a Setting quantitative reduction targets as a management approach has its mainstream roots in the Kyoto Protocol of 1997, which was based on country-level commitment to a carbon emissions reduction threshold decrease below a baseline year of 1990 levels 3. This followed with a best business practice of setting reduction targets from a baseline. Carbon targets are therefore the most established and frequently occurring, although additional reduction targets for energy, water and waste are also found. Targets once again were the subject of debate in the 2009 COP conference of the UNFCCC in Copenhagen, during the discussion on setting a binding agreement to cut carbon emissions. This was seen as a more globally acceptable and updated extension and adjustment to the Kyoto Protocol of 1997 that was set to expire in During that time, sector discussions and non-binding commitments to reductions were common one example coming from the member airlines of the International Air Transport Association (IATA), who set an industry goal to halve carbon emissions by 2050 from 2005 levels 4. Likewise, WTTC itself put out a report Leading the Challenge on Climate Change, which called for a similar 50% reduction in carbon emissions from 2005 levels by A handful of companies endorsed these commitments, and a few even continue listing them in their publicly reported long-term targets. However, the current trend is for more short-term targets to be set around reductions of energy, water, waste, or carbon, since this increases accountability with regard to managerial control. Within Travel & Tourism the most notable feature is the use of intensity-based reduction targets, rather than absolute reduction targets. Absolute reductions, such as those proposed in the Kyoto Protocol, are based on aggregate output. Intensity-based reduction targets are based on a reduction per unit of production, such as square footage, passengers, visitors, room nights, employees, or revenue dollars. Within benchmarked companies, absolute reduction targets in carbon, energy, water, or waste were found in only a handful of companies. Given that Travel & Tourism is expected to grow in contribution to the global economy from 9.8% in 2014 to 10.5% in , aggregate reductions are unlikely to be obtainable for energy, water and waste, given the expected growth of each company and the fact that general business models are based on centres of consumption increasing incrementally by guest and not based on process improvement in manufacturing or extraction. Aggregate reductions in GHG emissions would, however, be attainable if there were a shift to renewable energy and other low-carbon inputs Reporting the economic impacts of Travel & Tourism Historically, Travel & Tourism s economic impacts have been widely studied with comprehensive data provided by WTTC, UNWTO, OECD and others. However, since one of the fundamental concepts of ESG reporting focuses on the triple bottom-line approach, many topics and indicators covered within ESG relate to economic impacts. Analysis of those impacts is now generating data at company and destination levels, as well as at the product/service level, as ESG reporting has also increased disclosure regarding the economic impacts of Travel & Tourism. Source: Korean Air Sustainability Report Other companies, such as Marriott International and Thomas Cook Group, include itemised reporting on community investment in terms of charitable giving in cash and in-kind values. Event sustainability reports will also often report the direct and indirect economic impact of their event within the destination, and destinations themselves will include economic impact analysis to varying degrees in their own sustainability reports. Looking forward, the increased reporting of economic impacts can be a valuable resource for the sector. Further quantification of ESG issues also can be cross-analysed with the sector s economic activity. The information can be helpful when discussing issues of trade-offs and comparisons of economic impact with environmental and social impacts. Collectively, this information can help support the discussion of the economic impacts of Travel & Tourism and how they relate to ESG reporting in a global context Materiality Materiality assessments to determine key topics, through a process which is described in detail in the GRI guidelines, are currently not very common within Travel & Tourism GRI reports. (Less than 15% of those analysed contained a materiality matrix.) 3 Kyoto Protocol. Kyoto Protocol. United Nations Framework Convention on Climate Change, n.d. Web. 31 Mar <unfccc.int/kyoto_protocol/items/3145.php>. 4 See 5 Leading the Challenge on Climate Change. WTTC. 6 Economic Impact of Travel & Tourism WTTC. 7 IHG 2012 Corporate Responsibility Report. 8 American Airlines. The Economic Impact of American Airlines on the U.S. Economy 2012 Report

19 Figure 2.6: TUI AG Materiality Matrix ESG Reporting in Travel & Tourism Among those company reports that included a materiality matrix, some recurring topics could be found. Analysing the top ten material aspects among Travel & Tourism reporters with a materiality matrix, the frequency of topics was as follows: Figure 2.8: Frequency of commonly reported material topics among reporters with a materiality matrix In truth, many organisations embark on ESG reporting by using the indicators as a basis for defining what information they will report, without fully considering or applying the methodology put forth by GRI. This means there is a wider distribution of the indicators found among the reports and, just because reporting of certain indicators is not prevalent, it does not imply that the topic is irrelevant. It may be a case of companies either being hesitant to report this type of information, or not having the data capture structure in place, or simply not having considered the aspect before within the realm of ESG. Figure 2.9 shows the most and least common reported indicator categories across the sector. Source: Destination Sustainability. Rep. TUI AG, n.d. Web. 9 Apr <https://www.tuigroup.com/en/sustainability/sust_management/ reporting/sdreport2012>. Figure 2.9: Most and Least Commonly Reported Indicators in Travel & Tourism GRI Reports Figure 2.7: HSH Group Materiality Matrix Cross-sector Tour Operators Hotel Cruise Lines Airlines Most Common Energy Use & Conservation, GHG Emissions, GHG Emissions reduction efforts, Environmental impact mitigation efforts, Workforce data, Approaches to child labour, Climate change risks. Amount of materials used, Training data, Habitat protection/restoration, Customer satisfaction, Diversity. Community assessment, Skills development & performance reviews, Diversity, Programmes to avoid serious diseases. Anti-corruption training, public policy positions, Life-cycle analysis (LCA) assessments of products/services impacts, Habitat protection/restoration, Employee performance reviews, Collective bargaining %, Customer data breach complaints, Waste generation. Approaches to compulsory labour, Coverage of benefits, Diversity, Waste generation, Turnover, Collective bargaining. Uncommon Source: Hongkong and Shanghai Hotels Limited 2013 Annual Report and Sustainability Review, p Cross-sector Biodiversity value of water bodies and habitats affected by run-off and discharge Weight of transported hazardous waste Wage ratios vs local minimum wage Sources affected by water withdrawal Water recycling

20 38 Environmental, Social and Governance Reporting for the Travel & Tourism Sector Similarly, only a third of all the companies referenced content relating to the DMA disclosure component of the GRI guidelines. As the material topic identification and DMA content are central to the G4 guidelines, many current reporters need to address these components of their report. While this research does not seek to define key topics for the sector, this analysis has been used to support the identification of the most common topics and indicators in the guidance section as a starting point for companies evaluation Outlook on material topics in Travel & Tourism In April 2015, at the time of this publication s release, ESG reporting is first and foremost about attempting to commonly define the key issues and topics with a specific focus on risk disclosure, a company s management approach and indicators of performance or scale. This also holds true for companies in the Travel & Tourism sector. Specific issues regarding the economic, environmental and social impacts of Travel & Tourism have been researched for decades across a broad spectrum of topics. At the general sector level, over the past decade and particularly around the time of the Copenhagen conference, the broad topic of climate change relating to Travel & Tourism was explored thematically by global multilateral organisations 9. Research explored the various facets of climate change in terms of its risks and opportunities, and key areas of focus relating to the overall topic, such as energy use, biodiversity loss, water scarcity and local community impacts. These papers set out to build awareness of the implications of climate change itself and focused on policies at national levels or management approaches at organisational levels (such as setting emissions reduction targets), but not necessarily on the concept of reporting information concerning climate change. Other compilations of key issues and topics for the sector also exist. In June 2013, UNEP released the publication GEO-5 for business, which focused on identifying topics of business risks and opportunities across ten sectors (including tourism and transportation as two of the ten) 10. In 2013, GRI also published what appeared to be a hastily compiled list of various topics based on a literature review, which was criticised for its repetitions and duplications, lack of balance in terms of the specificity of topics, confusing wording, and also inconsistency with what sector companies were actually reporting. Further GRI-originated materiality studies are evolving in each sector, although not for Travel & Tourism at the time of publication. Significant work is underway to define the key topics and performance indicators for industries across Travel & Tourism. In addition to the topics, a commonly defined system of naming and categorising them is also needed. As the GRI s topics research example showed, the exercise of categorising and filtering topics is challenging. This is due to the fact that significant overlap is inevitable since, for example, the relationship between water and energy, biodiversity and climate change, supply chain and human rights, and many others, inherently exists. At the time of this report s publication, the Sustainability Accounting Standards Board s (SASB s) massive topic definition exercise across all industries encompasses several related sectors, with provisional standards developed in the USA for the related Travel & Tourism industries of Hotels & Lodging, Casinos & Gambling, Restaurants, Leisure Facilities, Cruise Lines, Car Rental & Leasing, Rail Transportation, Airlines and Restaurants. These standards have prescriptive definitions and prioritisation on which topics are material for each industry. (See Figure 2.8 for material issues in the Travel & Tourism sector.) Conversely, with the transition to the GRI s G4 guidelines, reporting organisations are expected to define and report only around their material topics as part of the reporting process itself. Increased use of the G4 guidelines will help provide more sector analysis across companies to evaluate which topics are being reported by whom, with an accompanying rationale that also forms part of the disclosure. With these developments, industry-specific initiatives are underway to support definition and clarification of these topics. In 2014, the International Tourism Partnership (ITP) engaged in a process to determine the most material social and environmental issues for the global hotel industry. Following the approach of GRI G4, the work encompassed identifying a range of social, environmental and governance issues, with ITP reaching out to its membership and wider stakeholders for feedback on the relevance and significance of these issues. It also held an event to bring together hotel companies and key stakeholders to discuss in more detail those issues felt to be most pressing and most challenging 11. ITP s work used the GRI sector supplements developed under prior versions of their guidelines in the relevant sectors of airport operators, event organisers, construction and real estate, and tour operators 12, in which topics and key indicators were defined in an engaged, multi-stakeholder process. While GRI sector supplements assist in specific sectors, most industries are not covered including those within Travel & Tourism, notably hotels and cruise lines. To date, however, regardless of the final terminology, categorisation, prioritisation, or performance measurement methods, it is apparent that a handful of broad issues will inevitably emerge as important across all Travel & Tourism industries in ESG reporting. These are presented in this guidance research as issue briefs, which were commonly identified through the reporting benchmarking exercise discussed in the previous section, as well as a literature review of research and guidance outlining key topics. As additional issues emerge, these can also be presented in the same format. 9 For example, see Climate Change and Tourism: Responding to Global Challenges From Davos to Copenhagen and beyond: advancing tourism s response to climate change and Climate Change and Tourism Policy in OECD Countries 10 UNEP. GEO-5 for Business: Impacts of a Changing Environment on the Corporate Sector Interview with Fran Hughes, Head of Programmes, International Tourism Partnership. 12 For more information see https://www.globalreporting.org/reporting/sector-guidance/sectorguidanceg4/pages/default.aspx. Tour Operators Sector Supplement was developed with the G2 guidelines and has not been adapted to the G4. Section 3: GUIDANCE FOR TRAVEL & TOURISM BUSINESSES 3.1 Introduction The World Travel & Tourism Council s (WTTC s) ESG research, carried out in collaboration with Greenview with co-ordination from the WTTC Sustainability Working Group, highlights the relatively low occurrence of ESG reporting among Travel & Tourism companies. Moreover, most of current sector reporters have not yet undertaken robust materiality assessment exercises, formalised stakeholder engagement platforms, or provided comprehensive disclosures on their approaches to managing the risks, impacts and opportunities relating to key topics. At the same time, the research demonstrates that regulatory and market pressures will accelerate the need for ESG reporting, and this will also result in greater depth and quality of reporting. When an organisation first embarks on ESG reporting, the task can seem daunting, especially if it chooses as role models the Fortune 100 companies that have over a decade of reporting experience and sizeable reporting budgets. However, as a first step it is important to take into consideration the fact that larger companies with years of reporting experience tend to have higher stakeholder pressures to address, as well as being accountable for the environmental and social impacts caused by their business models. Travel & Tourism s relatively nascent ESG reporting status is also due in part to lesser historical pressures to adopt the practice, and key stakeholders may not in fact require such robust reporting. Second, a multitude of resources already exist to assist organisations in their ESG reporting. Frameworks are now much more developed and include guidance and reference documentation. Thousands of peer reports are available for benchmarking content, design, metrics and disclosures. Research on various facets of reporting exists to help companies understand concepts. And companies can also take advantage of collaborative peer efforts to address the issues. Finally, stakeholders request reporting as much for the information it contains as for the process itself, although it is now recognised as a best practice to be encouraged. It is also widely appreciated that reporting is a long-term process and that first-time reporters cannot be held to the same level of scrutiny in report quality as established reporters. First-time reporters or respondents to ESG frameworks will often cite the benefits of the reporting process. Reporting enables companies, not least their corporate responsibility and sustainability departments, to connect the dots between various activities across the organisation and create continuous improvement opportunities. Some of the benefits of reporting that have been cited include: Identifying key stakeholders and topics of greatest importance Building trust through transparency Consolidating data and information Creating a repository to direct stakeholders to accurate, credible, self-published information, streamlining responses to varied requests on ESG topics Explaining a company s views and approach to topics of greatest importance Supporting customer evaluations prior to purchasing Explaining what makes an organisation unique Providing case studies and examples to highlight proud accomplishments Using ESG reporting for recruitment purposes. Sections 1 and 2 of this report are intended to provide background support and resources for first-time as well as experienced ESG reporters. This section is designed to help the less experienced reporters, or first-timers, benefit from the WTTC research, detailing the specific steps that organisations can take to approach ESG reporting. 39

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